A cautionary tale of the two-month CEO
Earlier this year, I had lunch with a friend I'll call Phil, who was looking for a new job. Phil had a successful 15-year run with his last employer, and he was well positioned for a COO or CEO position. Two weeks after our discussion, a headhunter told me about a position he was trying to fill.
The client, M&C Inc., had been a leader in its field for close to twenty years. It was still in a market leadership position, but the industry was only a fraction of its former size. It was purchased out of bankruptcy by Mason, who ran it for about 5 years. Mason spends most of time in Singapore, and he realized that taking M&C to the next level required more time with the business in Minnesota than he was willing to give.
I introduced Phil to the headhunter, who presented him to Mason. Mason and Phil met in early March. Within a few weeks, Phil was named CEO. A couple months later, I was preparing to present to a group of executives in transition, when I got a note from Phil. "I didn't want to surprise you in your presentation, Steve," Phil said. "But I will be among the executives you will be presenting to tomorrow. Things didn't work out for me at M&C Inc., and I am looking for a new opportunity."
The group discussion the next day was on how things might go wrong for executives as they integrate in their new roles. Phil was very open on how things went down. I think it was an eye-opener for everybody in the room. And the painful lessons Phil shared are important for both new executives and hiring companies.
The owner didn't leave the search up to the professionals. He hired a headhunter who uncovered at least one very compelling candidate. The candidate came from a company in adjacent space to the recruiting company, and Phil used that adjacency to make a strong case for how he understood the business.
Mason, being sold on the good fit of the adjacent business, freelanced in the search process by contacting executives of Phil's former company. Not only did he query people on what they thought of his candidate, but he attempted to get several of those who took his call to consider the position.
Of course, all of this behind-the-scenes maneuvering got back to the candidate. Undoubtedly, this left a bad taste in Phil's mouth. But his interest in finding a new position and getting his first-ever CEO spot led him to look beyond. He remained undeterred as he progressed in the search. And he was offered the position, which he quickly accepted in March.
2. The owner and the CEO could not make a long-distance relationship work. I know a lot of CEOs who succeed working for owners who live thousands of miles away. But a Singapore-Minneapolis axis, with thirteen time zones in between, is hard to manage. There has to be a commitment to 6am or 7pm phone calls, and even the International Date Line can get in the way.
Even a thirteen-hour time differential can work if the CEO has sufficient autonomy. That is hard to accomplish when (1) it is the first time the individual has held a CEO role, (2) the owner successfully held the role of CEO prior to this search and (3) there are no set communication times.
Working well with remote ownership requires establishing rules of the road on what needs prior approval, what needs to be reported after the fact and what can just get done. In this situation, establishing those guidelines had not happened at the get-go.
3. The role of an incumbent COO created confusion. A passed-over executive in a situation like this can be trouble for the recently hired exec, especially if they thought they were in line for the position. In this case, Phil believed that the COO was cool with an outside CEO, and he had been told by Mason of a division of labor between the COO and himself.
But as soon as Phil was in position, the COO received messages from Mason to take the initiative on areas assigned to the CEO. Maybe this was a continuation of past activities, when the owner served as a largely-absent CEO. Maybe this indicated lack of confidence with the new CEO. Whatever the cause, it created ambiguity of roles and responsibilities between the two people in charge. And the CEO did not feel empowered to countermand the owner's directive and to straighten things out between himself and his COO.
4. The organization's immune system confronted the CEO from the start. They liked the COO, and they liked the owner, who had bought the business at a point of crisis and had stabilized it (albeit at a point well below its heyday) and set it up for growth.
Phil brought with him a promise and maybe a threat of change. Early on, he was impressed with the institutional knowledge of his reports, less impressed with their functional expertise. It's unclear whether the organization felt it was being judged, but that is a good assumption. And Mason sold Phil on a mandate for change. Without selling the organization on "What's in it for me," a new direction would not seem like a popular course of action.
I never asked Phil if his departure were voluntary or not. Enough things had gone wrong for him to want to bail out early on. Maybe the owner quickly developed buyer's remorse from afar. Whatever the dynamic, this is a painful tale for all involved. For Phil, his search for the next step in his career was sidelined for months, and he probably didn't receive the full severance that a spot in a less entrepreneurial enterprise would provide. The whole experience may have led to a little PTSD, which will make it harder for him to jump back into the fray as fully engaged as he was when I first met him.
For M&C, the harm may be even greater. They end up having to conduct a second search. They have been without consistency in leadership for a half year, which might end up more like a full year. They take a blow to their reputation that might hurt them in their next search. The cost involved in getting this right will total hundreds of thousands of dollars, without considering the results of the turmoil on employees or consumers.
My focus is usually on strategies new executives can use to have a successful integration. And I will offer some suggestions. But before that, I'm compelled to make it obvious what an employer could do to make this difficult hire a success.
Let the search firm do its job. This story is the poster child for botched interference that created unnecessary ill-will. Instead, the recruitment process should end with a hire feeling like they are wanted and valued.
2. Spend time needed to be clear on expectations. Spell out what are the limits of the employee's authority. Make clear how his responsibility differs from those of his second-in-command.
3. Bestow your endorsement on the new hire. Make the organization understand that he has your full confidence. Do not participate in or condone any efforts that undercuts the authority he has been given by you.
So, what could the new CEO have done differently?
1. Don't expect you can succeed without a clear mandate. I think there were enough warning signs here that the best play may have to turn the offer down.
2. Ensure that the commitments you make with the owner on responsibility, reporting and autonomy are explicit. Talk them through. Write them down. Get the owner to make an endorsement of you across the employee community. Make sure any issues on a division of labor with your subordinates are just as clear. Copy the owner on written roles and responsibilities.
3. Hold to these commitments. You've just gone through the trouble to "make a contract" on responsibilities. Resist any early attempts that reduce your scope.
4. Control the communications. Given the difficulty in managing time zones, I would assume that directives from the owner to the COO came via email. Any email to the COO from the owner should have the CEO cc'd.
5. Start building the relationships that you need with employees to be successful. Speak with authenticity. Listen to them. Demonstrate how you value them. You need them on your side to accomplish your goals.
Phil's brief tenure at M&C provides lessons galore for both the executive and the company. An owner needs to stay in his own lane to give a high-risk situation a chance to succeed. An executive must stand firm in response to inappropriate action from a superior, and he has to get a good start in building bridges with employees. I don't mean to imply that Phil would have succeeded had he and Mason taken different tacks. But without these actions, a slim chance of success quickly became none at all.